2012 New Book: How to Create the Next Silicon Valley

People everywhere keep trying to ¬duplicate the success of Silicon Valley as an incubator for innovation and wealth. Victor W. Hwang, a Los Altos Hills, Calif., venture capitalist, has been studying what makes the Valley succeed and so many of its imitators fail, and he’s convinced he has found the answer. Not only that, but he’s putting his ideas to the test, trying to foster new versions of the place around the world. How? It’s about how people work together.

“Instead of thinking of Silicon Valley as this exceptional place,” he says, “think of it as a result of the world’s biggest experiment—the opening of the American West. Take people running away from the rest of the world, strangers with diverse experience and talent, and what happens? What emerges is a body of culture and invisible rules, and a mechanism for trusting strangers.” We think of the Wild West as a lawless place, but it was the opposite, Hwang says. And the same goes for Silicon Valley. Both relied on people from vastly different backgrounds and places, driven by passion, coming together to build environments of unusual trust and mutual support.

At age 40, a product of Harvard College and the University of Chicago Law School, Hwang has spent five years as the managing director of T2 Venture Capital, where he has been involved with numerous startups. Trust in Silicon Valley “happens in a million microtransactions,” he says. “It’s sort of understood. In other places they’d think you’re a fool. An entrepreneur in the Midwest will ask you to sign a nondisclosure agreement before he’ll say what he’s doing. In the Valley he’ll blab, he’s so excited. That N.D.A. is a waste.”

Hmm. Doesn’t sound like the sort of argument you hear in multibillion-dollar tech-related patent disputes. But Hwang argues that to develop networks of innovation, you must build “tribes of trust.” His set of rules he has entrepreneurs and investors and others sign: 1) Thou shalt break rules and dream. 2) Thou shalt open doors and listen. 3) Thou shalt trust and be trusted. 4) Thou shalt experiment and iterate together. 5) Thou shalt seek fairness, not advantage. 6) Thou shalt err, fail and persist. 7) Thou shalt pay it forward.

“On the Palestinian West Bank we’ve helped shape the work of 15 to 20 startup companies,

in a fairly isolated place,” he says. “In Bogotá my partner, Greg Horowitt, helped organize a convening point for the ¬entire startup industry.”

Where else should we look for future Valleys? The best places are refugee economies, where people have had to start from scratch. That’s why Israel has become so innovative, Hwang says: “Israel’s an interesting dichotomy, a zero-sum culture of tough negotiators but with a startup community based on collaboration and trust. The kibbutz was the foundational culture.”

Which American businesses get this right? Pixar. “They were so afraid of ¬becoming big and successful, they designed everything around a culture of continuing nascent creative talent. Also a lot of ad agencies. They have had to systematize the process of creativity.”

Hwang and Horowitt just published a book, The Rainforest: The Secret to Building the Next Silicon Valley (Regenwald, 2012). The title reflects their belief that you have to see the Valley and the relationships it requires as a living environment, not an economic system. But isn’t a rain forest a place of brutality and lawlessness? “When we were in a natural state we all lived in highly trusting communities,” Hwang insists. “This actually reflects how human nature was at its inception.”